In FAR textbook (BISK 41st), there is a question in a simulation in Property, Plant & Equipment section about commercial substance as follows;
[Situation]
■During year 3, Mink paid $60,000 and gave a plot of undeveloped land with a carrying amount of $340,000 and a fair value of $480,000 to Klub Co. in exchange for a plot of undeveloped land with a fair value of $520,000. The land was carried on Klub's books at $360,000. This transaction has commercial substance.
[Question]
Calculate the amount to be recorded for "Land received from Mink on Klub's books"
[Answer]
$480,000
[My question]
Why is the answer $480,000 not &460,000($520,000 - $60,000) ?
In the explanation section in the text book, it's written that the transaction is recorded at the fair value of the asset received or the asset given up, whichever is greater (more clearly evident), and a gain or loss is recognized on the exchange in an exchange with commercial substance.
In this case, I $520,000(fair value of the asset given up) is greater than $480,000(fair value of the asset received) from Kolb's point of view. Therefore, I thought following journal entries can be done in Klub's books.
Dr.Cash: 60,000
Dr.Land(received) 460,000
Cr.Land(given up) 360,000
Cr.Gain 160,000
Could somebody help me where I am wrong ?